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San Antonio project seeks lower costs, improved care

Dr. Fox Orthopedics

Bundling Payments: San Antonio Project Seeks Lower Costs, Improved Care

Keywords: Hospitals  Medicare

Medical Economics Feature - July 2009

By Ken Ortolon
Senior Editor

Can cheaper health care be better health care? Baptist Health System in San Antonio thinks so, and it's betting some of its potential profits that it can prove it.

The five-hospital Baptist Health System is one of five hospitals or hospital systems around the country the U.S. Centers for Medicare & Medicaid Services (CMS) selected for a demonstration to test the effectiveness of bundling payments for both inpatient hospital and physician services into a single payment. CMS believes bundling payments for all services during an inpatient stay may better align incentives for hospitals and physicians to work together to improve quality and achieve greater efficiency in the care delivered to Medicare beneficiaries.

"What CMS is interested in, obviously, is ways to drive both cost and quality," said Carol Wratten, MD, interim chief medical officer for Baptist Health System. "And it's been shown many times before that places that become more efficient and do things at a lower cost usually have higher quality outcomes."

The project, known as the Acute Care Episode (ACE) Demonstration, targets payments for orthopedic and cardiology services involving implantable medical devices, such as artificial knees and hips and pacemakers. Participating hospitals must agree to give CMS a discount from the normal Medicare payment for those services. The hospitals hope to finance that discount and actually increase their revenues by meeting a series of quality and efficiency measures, as well as getting medical device vendors to lower their prices on implantable devices in return for greater volume.

While Dr. Wratten says many of the orthopedic surgeons and cardiologists who practice at Baptist hospitals are "enthusiastic" about the project, some San Antonio physicians and the Texas Medical Association have raised ethical questions because it involves gainsharing for both the physician and the patient. Gainsharing refers to an arrangement between a physician and a hospital to share in the cost savings that result from specific actions to improve the efficiency of care delivery.

Aligning Incentives

CMS announced the ACE Demonstration in January, and it is expected to run through December 2011. Baptist Health System is the only Texas hospital or hospital system chosen to participate and is the only one that will participate for both orthopedic and cardiology services. Other participants include Oklahoma Heart Hospital in Oklahoma City, Exempla Saint Joseph Hospital in Denver, Hillcrest Medical Center in Tulsa, and Lovelace Health System in Albuquerque. The project was open to hospitals in Texas, Oklahoma, New Mexico, and Colorado. Dr. Wratten says CMS chose Baptist from more than 100 hospitals that applied.

Baptist initially expected to roll out the project in April but at press time was still negotiating with medical device vendors.

The project covers payments for 28 cardiac and nine orthopedic inpatient surgical services and procedures. Officials chose those services because of historically high volume and because quality metrics are available.

CMS will market the hospitals, known as "value-based care centers," to both beneficiaries and referring physicians.

To participate in the project, the hospitals must offer CMS a discount. CMS will return half of that discount to the patient, and Dr. Wratten says that could be as high as $1,200. The hospitals also had to agree to collect data on 22 quality metrics.

Physicians who participate in the project also could see their payments increase. While the hospital has agreed to discount its fee, physicians still will be paid 100 percent of the Medicare allowable and will not have to worry about collecting the 20-percent patient copayments. The hospital will do that.

In addition, if the project is successful, physicians could earn up to an additional 25 percent. Dr. Wratten says the hospital will make those payments monthly if the project shows a profit and if it meets the quality metrics. The consequences of not realizing the profit and quality targets are unclear.

Reducing Inefficiency

Baptist created a committee of hospital administrators and physicians to oversee the program and establish the quality metrics needed to qualify for gainsharing. The hospital system also set up working groups in each of the service areas involved that are developing standardized order sets and other quality initiatives that Dr. Wratten hopes will improve care and eliminate unnecessary costs.

"If everybody knows what it is they're supposed to do and you have reduced the unnecessary variation, then the risk of medical error is going to be less and the chance that the patient is not going to get something that is recommended that they should get will be less," she said.

Participating physicians also are working with the hospital system to convince the implantable device vendors to cut their prices. Dr. Wratten says there is tremendous variation in price among vendors even though the devices may be "pretty equal in their efficacy."

The vendors are reluctant to give those discounts but "are coming around" because of potentially higher sales to Baptist.

"We're the only facility in Texas [to participate in the ACE project] and it will be advertised on the CMS Web site that there is a cost savings to the patient," she said. "CMS believes, and we hope, that that will drive volume to our facilities and increase the volume of business that our physicians do. And that will benefit the vendors. So even though they may make a little bit less on individual implants, they will make more down the road."

Patients vs. Profits

Dr. Wratten says many of the physicians who practice at Baptist facilities have been very cooperative and enthusiastic about the project.

"We have really good core groups in orthopedics, cardiovascular surgery, and cardiology that are really working with us," she said. "And some of them are excited to put the patient in the middle and to have aligned incentives to do the right thing for the patient."

San Antonio orthopedic surgeon David Fox, MD, is excited about the project on two fronts.

"As an orthopedist, I think it's going to be a great thing for the Baptist hospital system in San Antonio. Medicare is going to market the demonstration, and the hope and belief is it will drive business to San Antonio," said Dr. Fox, who has been active on the ACE Demonstration committees at Baptist. "I think it's exciting that we're going to be on the edge of how I think health care is going to go."

Dr. Fox believes Medicare eventually will steer patients toward centers of excellence that have "a certain amount of expertise," especially in large urban areas such as San Antonio, Houston, and Dallas.

He also sees great value in the project's quality improvement efforts. Total joint replacements are performed in all five of Baptist's hospitals in San Antonio. While the quality of care is close at all of the hospitals, there are substantial differences in how that care is delivered in each, Dr. Fox says.

"Having standardized order sets in all five hospitals and specific matrices in regards to quality will allow us to all focus our attention on quality outcomes," he said. "Everybody will run down that same path, and I think it can't help but improve quality."

However, some physicians are concerned about the program. One physician who asked not to be identified says the project seeks "to contain costs by encouraging the physician to modify his clinical behavior and to encourage the vendors to lower their implant prices." While these changes may be good, the doctor sees a potential for physicians to be pressured about prosthetic choice.

TMA and Bexar County Medical Society officials also have met with Baptist administrators and have raised ethical concerns, as well.

"There are all sorts of questions that have to be answered about the extent to which it's either incentivizing or deincentivizing the physician to be laser-focused on the interests of the patients," said Rich Johnson, TMA vice president of medical economics. Mr. Johnson participated in that meeting with hospital officials, as did TMA Executive Vice President and Chief Executive Officer Louis J. Goodman, PhD, and Bexar CMS Executive Director John Wisniewski. Mr. Johnson says physicians are concerned about whether they will be able to maintain their clinical autonomy to do what they believe is best for the patient.

TMA policy adopted in 1993 "adamantly opposes all proposals to involuntarily bundle the professional services of any physician into a fixed payment per discharge to the hospital or its medical staff."

In February, the American Academy of Orthopedic Surgeons adopted a new policy that "supports efforts of all stakeholders to develop and evaluate payment methodologies that will incentivize coordination of care among providers (including physicians and hospitals) and help curb healthcare inflation." That policy, however, says there should be numerous safeguards to protect patient-focused care.

Ken Ortolon can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by e-mail at Ken Ortolon.

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